U.S. to hit debt limit next week, Yellen warns Congress ~ January 14, 2023

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Yellen said that the Treasury Department would begin taking “extraordinary measures” in order to avoid default.

By Rebecca Shabad

WASHINGTON — The U.S. is expected to hit the debt ceiling next Thursday, Treasury Secretary Janet Yellen warned in a letter Friday to House Speaker Kevin McCarthy, R-Calif.

Beginning on that date, Jan. 19, Yellen said, the Treasury Department would need to begin taking “certain extraordinary measures” to avoid a potentially catastrophic default.

Extraordinary measures allow the government to buy time so that Congress can negotiate and pass a debt limit increase. In the letter, Yellen said the measures enable “the government to meet its obligations for only a limited amount of time.” She said that while the Treasury Department can’t identify exactly when the measures will be exhausted, she said, it is “unlikely” that they “will be exhausted before early June.” 

Yellen said Congress must take action as soon as possible to raise or suspend the debt limit.

“Failure to meet the government’s obligations would cause irreparable harm to the U.S. economy, the livelihoods of all Americans, and global financial stability,” she said.

Yellen said that even threats by lawmakers not to raise the debt ceiling have “caused real harms, including the only credit rating downgrade in the history of our nation in 2011.” Congress last lifted the ceiling in December 2021.

Her warning comes just a week after McCarthy was sworn in as speaker after a lengthy intraparty battle. Democrats have voiced concerns that House Republicans, now in the majority, will use the debt limit to try to pass spending cuts. They have also expressed concerns that House Republican leadership won’t be able to unite its divided caucus to pass legislation.

At his first weekly news conference as speaker Thursday, McCarthy addressed those concerns, saying that Republicans “don’t want to put any fiscal problems through our economy, and we won’t.”

McCarthy suggested that he would look to the 2019 bipartisan deal to lift the debt limit as a model for what the current Congress could pass. McCarthy said that in exchange for raising the ceiling, lawmakers could set a cap on spending.

“Spending is out of control here,” he said. “There’s been no oversight, and we cannot continue around the same process.”

The speaker signaled he’d like to negotiate with Democrats, whose support the GOP will need in the Democratic-controlled Senate for the debt ceiling and other must-pass legislation.

“I had a very good conversation with the president when he called me,” he said, “And I told him I’d like to sit down with them early and work through these challenges.” 

But White House press secretary Karine Jean-Pierre said Friday that the debt ceiling should be raised without policy conditions.

“We believe when it comes to the debt limit, it has been done in a bipartisan way over the years and decades, and it should be done in a bipartisan way, and it should be done without conditions. That is important here,” she told reporters. “We’re not going to do any negotiations.”

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